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FRC and ASIC (Australia) MOURA - FRC Guidance to Recognised Supervisory Bodies

The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from an omission from it.

The Financial Reporting Council Limited 2024

The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 8th Floor, 125 London Wall, London EC2Y 5AS

1. Background

Under powers delegated by the Secretary of State, the Financial Reporting Council (FRC), can make declarations under Section 1221 of the Companies Act 2006 (the Act)¹ under which auditors qualified in, or holding qualifications from, third countries are to be treated for the purposes of the Act as holding an approved third country qualification. To support these declarations, the FRC negotiates individual memorandums of understanding on reciprocal arrangements (MOURAs) concerning recognition of audit qualifications between the UK and other countries.

The FRC worked with the Australian Securities and Investments Commission (ASIC) to reach an agreement, and on 26 March 2024 both parties signed a MOURA.

The MOURA provides a process by which auditors who have obtained a professional audit qualification as a Statutory Auditor, in either the UK or Australia, can apply for recognition of their qualification and audit rights in the other country.

On 26 March 2024 under Section 1221 of the Act, the FRC signed three declarations recognising the following persons as holding approved third country qualifications (approved Australian qualifications):

Chartered Accountants Australia and New Zealand (CA ANZ) – CA ANZ members who have passed the Australian variant papers;
CPA Australia – CPA Australia members who have passed the Australian variant papers and meet certain conditions as set out in the relevant Section 1221 declaration;
Registered Company Auditors - persons registered as auditors under Part 9.2 of the Australian Corporations Act 2001 and holding full membership with either CA ANZ or CPA Australia.

This document sets out the steps Australian applicants are required to take to become UK Statutory Auditors and the steps UK applicants must take to become Registered Company Auditors in Australia.

UK applicants must be members of a Recognised Supervisory Body (RSB), and Australian applicants must be members of CPA Australia or CA ANZ, and, in all cases, applicants must have achieved membership by completing a typical pathway to membership of the relevant body. A 'typical pathway' is a path to membership which is completed through the education and training required by that body.

Purpose and status of this guidance

The purpose of Section 1 and Section 2 of this document is to set out guidance for the RSBs to apply when exercising their approval and registration function in relation to Australian Registered Company Auditors and individuals holding an approved Australian qualification, so as to meet the requirements of the Act and the relevant Section 1221 declarations. It is impractical to provide guidance for every situation that may arise. Applicants seeking approval and registration from an RSB must always comply with the regulations of that RSB. Such regulations take precedence over this guidance. The purpose of Section 3 of this document is to set out guidance that RSBs may wish to provide to their members on how they can apply to become Registered Company Auditors in Australia, though RSBs and their members should check the latest requirements themselves.

This guidance is not intended to replace or override any legislative provisions. It should be read in conjunction with the Act, the MOURA agreed with ASIC, the relevant Section 1221 declarations and any other requirements or guidance that the FRC may issue. This guidance explains the requirements that must be met whereby Australian Registered Company Auditors and individuals holding an approved Australian qualification are to be regarded for the purposes of Chapter 2 of Part 42 of the Act as holding an appropriate qualification (UK audit qualification) and being eligible for registration as a UK statutory auditor. Nothing in this guidance may be construed, so as to constrain the FRC from acting, where it deems it to be appropriate, in respect of an RSB's performance of its approval and registration functions.

The guidance is intended as general information and should not be relied upon as being definitive or all-inclusive. In particular, the information in Section 3 of this document is included in reliance on information provided by ASIC and, as stated above, RSBs and their members are advised to check the latest requirements themselves. They should also refer to the legislation, MOURA and Section 1221 declarations in their entirety. All RSBs should carefully evaluate how the requirements apply to their respective organisations and to any applications for the recognition of third country qualifications that they receive.

2. Section 1 Requirements for Registered Company Auditors seeking a UK Audit Qualification and UK Statutory Auditor (Responsible Individual) status

The Section 1221 declaration signed in relation to Registered Company Auditors recognises Registered Company Auditors as holding an approved third country qualification provided they pass an aptitude test. The required aptitude test will test the applicant's knowledge of UK Tax and Law.

An RSB² should ensure that an Australian Registered Company Auditor applicant follows the requirements as set out in their rules and regulations to grant Statutory Auditor status. RSBs should ensure they include clear guidance on the application process on their websites³. The summary below acts as a guide to the key matters an Australian Registered Company Auditor will be required to demonstrate. RSBs must satisfy themselves that applicants have met the following eligibility requirements and completed the following steps before granting audit registration:

1. Eligibility requirements for Australian Registered Company Auditors

Hold Registered Company Auditor status in Australia.⁴

Applicants are required to hold Registered Company Auditor status at the point of applying to a Recognised Qualifying Body (RQB). It must not be relinquished prior to applying to an RQB. Where an applicant is a Registered Company Auditor, they are required to pass an aptitude test. If Registered Company Auditor status has been relinquished, the applicant can still apply based on their CA ANZ/CPA Australia membership. However, they would be required to follow Section 2 requirements and complete an adaptation period.

The RQB should obtain formal confirmation from ASIC that the applicant holds Registered Company Auditor status. Confirmation of Registered Company Auditor status can also be obtained by accessing the publicly available Register (ASIC Registers).

Obtained Registered Company Auditor status under the rules of ASIC in Australia through a typical pathway and not through any reciprocal agreement.

It is an applicant's responsibility to provide confirmation from ASIC that they hold Registered Company Auditor status and that this was obtained after completing the education and training set by ASIC, and not via any reciprocal membership pathway.

Be a current member of either CPA Australia or CA ANZ. Membership is required to be maintained even after Statutory Auditor status is obtained in the UK. Some UK RSBs refer to a Statutory Auditor as a 'Responsible Individual'.

The RSB needs to ensure that the applicant holds and maintains membership with either CPA Australia or CA ANZ. At the point of application the RSB should ensure that the applicant holds full membership, and that the applicant agrees to maintain their membership with CPA Australia or CA ANZ as a condition of being a UK statutory auditor.

It is also an applicant's responsibility to ensure that their membership of CA ANZ or CPA Australia continues throughout the period when they hold audit rights in the UK. This will be checked by the RSBs as part of their registration procedures.

Have obtained their membership with CPA Australia or CA ANZ through a typical pathway to membership of that body.

It is an applicant's responsibility to provide confirmation from CA ANZ/CPA Australia that their full membership was obtained after completing the CA ANZ/CPA Australia education and training, and not via any reciprocal membership pathway.

Provide confirmation in writing from ASIC and either CPA Australia or CA ANZ that they are a member in good standing.

Applicants must provide confirmation in writing from ASIC that they are a Registered Company Auditor in good standing. They must also provide confirmation in writing from either CPA Australia or CA ANZ that they are a member in good standing with the Professional Body.

It is the applicant's responsibility to obtain the above evidence of eligibility and provide it in the form that the RSB requires.

2. Application process

Each RSB needs to set out clearly on their website the specific steps an applicant needs to take in line with their own rules and regulations. This Guidance Note is designed to be more high level and covers the general principles rather than the detailed steps an applicant will need to take in relation to the application process.

a) Register with a Recognised Qualifying Body (RQB)

An RQB is authorised to award a UK Audit Qualification. Therefore, an applicant is required to register with an RQB (in line with the RQB's own procedures), to enable the individual to sit an aptitude test in UK Tax and Law and obtain the UK Audit Qualification.

b) Complete an aptitude test.

Applicants will need to sit and pass the following exams depending on which RQB they have registered with to sit an aptitude test:

ACCA*	Taxation (UK Variant)
	Corporate and Business Law (UK Variant)
ICAEW*	Principles of Tax
	Law
ICAI*	CAP2 Taxation (UK Variant)
	CAP1 Law for Accountants (UK Variant)
ICAS**	Business Law
	Taxation

*The papers listed above are required under the RQB's 2023 syllabus and therefore it is essential each RQB provides the most up to date information to applicants should there be a syllabus change. **Papers listed are from ICAS's new CA2024 syllabus.

The aptitude test must be sat following the individual's application to the RQB and before approval of their third country qualification has been granted.

Once an applicant has passed the aptitude test, they hold an approved third country qualification which is an appropriate qualification for the purpose of eligibility to become a UK statutory auditor.

c) Apply for membership, regulated non-member or affiliate status with a Recognised Supervisory Body (RSB)

The applicant will need to be a full member of either CA ANZ or CPA Australia to enable them to apply for either membership, regulated non-member or affiliate status with one of the RSBs.

The applicant will normally apply for membership, regulated non-member or affiliate status to the RQB/RSB they completed their aptitude test with as this is likely to be a simpler process for them. The status that is granted will depend on the rules of the RSB and the conditions of any relevant reciprocal membership agreements.

There are reciprocal membership agreements in place between some UK RSBs and CA ANZ. Therefore, CA ANZ members should be advised to review the requirements under these agreements before applying for membership.

As there are currently no reciprocal membership agreements between UK RQBs and CPA Australia, RSBs should advise applicants holding a CPA Australia qualification they will need to discuss directly with the RQB/RSB its requirements to obtain membership and whether the applicant can meet these. Should a CPA Australia member be unable or choose not to obtain full membership with an UK RSB they will need to apply for regulated non-member status with ACCA or affiliate status with ICAEW, ICAI or ICAS.

As part of the application process the applicant will need to provide evidence from CA ANZ or CPA Australia that they are in good standing.

d) Obtain a Practising Certificate

Where an applicant becomes a full member of an RSB they will also be required to obtain a Practising Certificate and will need to follow the requirements as set by the body to which they are applying. The RSBs do not grant practising certificates to regulated non-members or affiliates. However, regulated non-members or affiliates may still be Statutory Auditors without holding a practising certificate.

e) Register to become a UK Statutory Auditor

Once the applicant has been awarded the Audit Qualification, has membership, regulated non-member or affiliate status and, where applicable, holds a Practising Certificate, they are eligible to apply to become a Statutory Auditor. Some UK RSBs refer to a Statutory Auditor as a Responsible Individual. RSBs must ensure applications are supported by the registered audit firm where the applicant works, and the firm's Audit Compliance Principal confirms the applicant's competence.

RSBs may require applicants to follow the RSB's standard process to obtain Statutory Auditor status.

This includes:

i) Completing an application form; and ii) Completing an audit experience form.

The audit experience form demonstrates what audit work experience the applicant has undertaken in the preceding 24 months. There is no minimum number of hours to be completed and it is for the RSB to assess whether the applicant has sufficient audit experience.

An applicant may include Australian audit experience and any UK audit experience gained since arrival in the UK, for example whilst studying for the aptitude test. The decision whether to grant RI status is made by the RSBs following an assessment of the quantity and nature of the recent audit experience and CPD included on an applicant's audit experience form. The RSBs may require that further UK audit experience be obtained prior to registering the individual as a Statutory Auditor.

3. Local Audit (England) - Key Audit Partner

To become a Key Audit Partner for local audits there are additional requirements that an applicant needs to meet. Further information on the requirements and process can be found on ICAEW's website at https://www.icaew.com/regulation/local-public-audit-in-england

3. Section 2 Requirements for CA ANZ and CPA Australia members seeking a UK Audit Qualification

The Section 1221 declarations signed in relation to CA ANZ and CPA Australia qualifications recognise these qualifications as approved third country qualifications provided an adaptation period is completed. Currently, only those qualifications where the Australian Tax variants have been passed are included – please see the eligibility criteria set out below. RSBs must satisfy themselves that applicants have met the following eligibility requirements and completed the following steps before granting audit registration:

1. Eligibility requirements for CA ANZ and CPA Australia members

Be a current member of either CPA Australia or CA ANZ. Membership is required to be maintained even after a UK Audit Qualification has been granted and Statutory Auditor status has been obtained in the UK.

The RSB needs to ensure that the applicant holds and maintains membership with either CPA Australia or CA ANZ. At point of application the RSB should ensure that the applicant holds full membership, and through a declaration in writing that the applicant agrees to maintain their membership with CPA Australia or CA ANZ.

Have obtained their membership with CPA Australia or CA ANZ through a typical pathway to membership of that body.
Applicants must provide evidence from either CPA Australia or CA ANZ that they are a member in good standing.
Have passed the Australian Tax variants within their qualification: i. CPA Australia members are required to have passed the Taxation Elective (Australian) paper; ii. CA ANZ members are required to have passed Core 4: Taxation (Australian) paper.

This is to demonstrate they obtained the qualification in Australia.

Additional requirements for CPA Australia members. Only those CPA Australia members who meet the following additional conditions are eligible to apply:

i. Holders of the CPA qualification who have entered the CPA programme with an accredited degree (under the joint CPA Australia and CA ANZ scheme) or completed the CPA Australia Foundation papers; and ii. Electives: - Holders of the CPA qualification must also have passed the Advanced Auditing and Assurance elective, and the elective in either Australian Taxation or in Advanced Taxation.

Applicants who obtained their qualification under a previous syllabus will be required to provide evidence from their qualifying body that the papers they passed were equivalent examinations to those listed above.

2. Application process

Where applicants meet the above conditions, they will be eligible to complete an adaptation period in order to obtain the Audit Qualification (AQ), also known as an "appropriate qualification". The adaptation period must be conducted in accordance with the rules and practices of an RSB. To obtain the AQ they will be required to do the following:

i. Complete an adaptation period of 2 years supervised audit experience at an accredited training office/employer in the UK; ii. Complete the training record/log required by the RSB and demonstrate they have achieved the minimum amount of audit experience as set by the RSB; iii. Pass the ability assessment. The assessment requires the completion of a declaration by the applicant's supervisor confirming they have undertaken the necessary adaptation period and gained the required skills for a UK AQ; and iv. Provide evidence from either CPA Australia or CA ANZ that they are a member in good standing.

Once the individual has been awarded the AQ they are then able to follow steps c, d and e in Section 1 (Requirements for Australian Registered Company Auditors seeking a UK Audit Qualification) in order to obtain Statutory Auditor (Responsible Individual) status.

3. Adaptation Periods

Under sub-section 7C of Section 1221 an adaptation period is a period not exceeding 3 years, in which the applicant pursues the profession of statutory auditor under the supervision of a person who holds an appropriate qualification, subject to an assessment of the applicant's ability to pursue the profession of statutory auditor in the UK (known as the “ability assessment”). In the case of CA ANZ and CPA Australia members, the FRC has determined that the length of the adaptation period should be 2 years for an applicant working full-time.

An adaptation period must be completed, and the ability assessment must be conducted in accordance with the rules and practices of the relevant RSB. Paragraph 7A of Schedule 10 requires that these rules and practices cover at least the following:

The body must have regard to the circumstances of each applicant in relation to the adaptation period, and the ability assessment, to be required of the applicant;
The applicant may be required to undergo further training during the adaptation period;
The applicant's performance during the adaptation period must be assessed by the body;
The body must determine the applicant's professional status during the adaptation period.

To the extent that they have not already done so, RSBs must put in place regulations that cover adaptation periods. In addition, applicants and their firms need to be aware of the regulations they must follow.

An adaptation period must last for at least 2 years and be a period of supervised audit experience at an accredited training office/employer in the UK.

Adaptation periods can only commence after the date of signing the Section 1221 declarations. For Australian applicants only work experience obtained on or after 26 March 2024 can be considered.

The RSBs' rules and regulations need to ensure that they allow for work experience to be counted for periods prior to their regulations on adaptation periods coming into force. This will apply where the date of signature of the Section 1221 declarations/MOURAs is earlier than the implementation date of the applicable RSB regulations.

The statutory audit work experience that applicants obtain needs to be UK audit. Statutory audit work experience obtained in territories where the FRC has assessed the law and practice relating to audit as similar to UK (Republic of Ireland, Germany Luxembourg, Cyprus, Netherlands, USA and market traded company audits in Jersey, Guernsey, and the Isle of Man) cannot be used. Audit work experience gained in these jurisdictions (either statutory audit work or other audit work carried out under ISAs) can be counted as other audit work experience.

Applicants must complete the training record/log required by the RSB and demonstrate they have achieved the minimum amount of audit experience as set by the RSB. The training record/logbook can be the existing Audit Qualification training record required by the RSB.

The RSB should ensure that applicants complete the Audit Qualification training record in sufficient detail such that their supervisor is able to be satisfied that they have the ability to pursue the profession of a statutory auditor.

Applicants must pass an ability assessment. The assessment requires the completion of a declaration form by the applicant's employer confirming they have completed the adaptation period and gained the required skills for a UK Audit Qualification.

The FRC has considered the requirements of s1221 and of Schedule 10 to the Act and is satisfied that an RSB's current Audit Qualification training record/log or Practising Certificate Experience Form (PCEF) can form the basis for this review. The RSBs should add the following assessment of ability declaration to their training records.

To be completed by the applicant's Supervisor

I confirm, based on my assessment of the applicant's audit work experience completed during the adaptation period and training record, that the applicant has the ability to pursue the profession of statutory auditor in the United Kingdom.

Name:

Signed:

Date:

The above declaration is the recommended minimum requirement; however, it can be expanded upon should it be deemed necessary. The declaration can be added to the existing training record or as an annex to the training record.

The declaration needs to be approved and signed off by an individual who holds an appropriate qualification (UK audit qualification). In many cases, this will be a firm's training principal or equivalent.

This is the minimum and it is open to firms/supervisors to request additional evidence of an applicant's work experience to enable them to complete the ability assessment declaration.

4. Local Audit (England) - Key Audit Partner

To become a Key Audit Partner for local audits there are additional requirements that an applicant needs to meet. Some of these requirements can potentially be obtained during the adaptation period. Further information on the requirements and process can be found on ICAEW's website at https://www.icaew.com/regulation/local-public-audit-in-england

4. Section 3 Requirements for UK applicants seeking Australian Registered Company Auditor status

This section was prepared based on information provided by the Australian Securities and Investments Commission (ASIC) in August 2024.

The following process can be followed by members of ACCA, ICAEW, ICAI, ICAS and AIA who hold a UK Audit Qualification (AQ). UK AQ holders can apply to ASIC to obtain Registered Company Auditor status and must comply with the requirements set out in Section 1280 of the Corporations Act 2001. Regulatory Guide 180 Auditor Registration provides guidance on how applicants can apply and meet the requirements of Section 1280.

The summary below is a guide to the key components a UK applicant will be required to meet. We recommend UK applicants review ASIC's website (www.asic.gov.au) for the latest information and forms.

Application Form - the current application form is Form 903AA 'Application for Registration as an Auditor'. If an applicant is either a resident in Australia or has an Australian residential address they can complete the application form via an online portal. However, if they are still in the UK they will need to submit a paper application form.

1. Academic Qualification

The academic qualification requirements are set out in RG 180 and s1280 (2A) states:

i. An applicant must hold a degree, diploma or certificate from a prescribed university or another prescribed institution in Australia.

And

ii. The degree, diploma or certificate must represent a course of study in:

accountancy (including auditing) of not less than three years duration; and
commercial law (including company law) of not less than two years duration.

And

iii. Applicants must have completed a course in auditing prescribed by the Corporations Regulations.

Australian regulations (s1280 (2B)) allow for overseas applicants to have their qualifications assessed for equivalency on a case-by-case basis.

ASIC have confirmed that applications received from ACCA, ICAEW, ICAI and ICAS members, with a UK AQ, have previously been assessed as holding an equivalent qualification under s1280 (2B) and such members are unlikely to have to complete a course in auditing prescribed by the Corporations Regulations. ASIC has not received an application from an AIA AQ holder to date and an equivalency assessment will be required should an application be submitted.

UK applicants will be required to provide evidence that they have passed an appropriate course in auditing and have been awarded the UK AQ, as determined by ASIC.

Most UK applicants will be required to complete a conversion course in Australian Company Law and Tax; however, this is assessed on a case-by-case basis. If an applicant is required to complete the conversion courses, they can sit and pass any approved post graduate courses in Australian Company and Australian Taxation. Both CA ANZ and CPA Australia will be able to assist the applicants in identifying the appropriate conversion courses. For example, CA ANZ Foundation papers:

i. Business Law in Australia; and ii. Taxation in Australia.

These modules are studied in association with Deakin University. Further information on the papers and the application process can be obtained from CA ANZ.

Please note, the applicant must have obtained their UK AQ by completing a typical pathway to membership of the relevant body. A 'typical pathway' is a path to membership which is completed through the education and training required by that body, rather than, for example, membership through a reciprocal agreement.

2. Skills

Applicants can follow one of two routes to demonstrate they have the appropriate skills for registration as an RCA:

i. Practical Experience

Applicants are required to demonstrate that they have achieved 3,000 hours of audit work under the direction of an RCA (or equivalent) during the five years immediately before the date of application, and this must include 750 hours of supervising audits.

UK audit experience will be assessed for equivalence and can be used towards the 3,000 hours. ASIC may require UK applicants to undertake more audit experience in respect of audits of the financial statements of entities under Chapter 2M of the Corporations Act 2001.

Applicants are required to complete Document A: Practical auditing and other equivalent experience and Document B: Supervisor declaration.

ii. Auditing competency standard

Applicants can complete the Auditing Competency Standards by completing a logbook and assessor's statement (Document E: Auditor competencies logbook 2016.)

3. Capable, Fit and Proper

Applicants must provide:

i. A Capability Report (Document C) including details of: (a) the three most significant audits they have worked on with a level of information provided in the capability report sufficient to demonstrate they have had experience in handling complex audits (b) a summary of their continuing professional education in the last 5 years. (Document C: Capability report) ii. A completed Capability Declaration (Document D) from each of their nominated capability declarants named in Form 903AA as the supervisor or referee for the audits described in the Capability Report. (Document D: Capability declaration) iii. A fit and proper statement in relation to any ‘Yes' answers in section 9 of the application form. (Form 903AA)

4. Membership of an accredited body

UK applicants are not required to obtain membership with either CA ANZ or CPA Australia to obtain RCA status. However, they may wish to, and it may be a requirement of the audit firm they work for in Australia.

Whilst ASIC does not require UK applicants to maintain their membership with their qualifying body, if may be necessary to do so to take advantage of any reciprocal membership agreements between UK and Australian Professional Bodies.

5. Contact Information

The application form and supporting forms can be obtained from ASIC's website www.asic.gov.au

If any applicant encounters difficulty with the online portal (or the application process generally) then can call ASIC's Client Contact Centre on 1300 300 630 (within Australia) or +61 3 5177 5407 (outside Australia). There is also an option for submitting a general enquiry via ASIC's website https://asic.gov.au/about-asic/contact-us/

Financial Reporting Council 8th Floor 125 London Wall London EC2Y 5AS +44 (0)20 7492 2300 www.frc.org.uk

https://www.legislation.gov.uk/ukpga/2006/46/section/1221 ↩
The following are both Recognised Supervisory Bodies (RSB) and Recognised Qualifying Bodies (RQB): ACCA https://www.accaglobal.com/gb/en.html ICAEW https://www.icaew.com/ ICAI https://www.charteredaccountants.ie/ ICAS https://www.icas.com/ ↩
https://www.legislation.gov.uk/ukpga/2022/20/section/8 ↩
In this respect, the Section 1221 declaration for Registered Company Auditors requires the person to be a Registered Company Auditor; and have either (i) successfully completed the CAANZ Chartered Accountant qualification and holds full membership of CAANZ or (ii) successfully completed the CPAA CPA qualification and holds full membership of CPAA; ↩
Regulated non-member is the term used by ACCA. Affiliate status for the purposes of this guidance note is a term used at ICAEW, ICAS and ICAI for regulated non-members. It does not include ACCA Affiliates who are individuals that have passed the ACCA examinations but have not yet applied for ACCA membership. ↩

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